Happy (Paper) Trails To You: How Moving or Hiding Money Can Delay A Closing

My rocky closing yesterday was caused by lack of a paper trail on the seller side. The seller had paid off a HELOC last month with money from an account that was created as a holding place during the financing of a new construction senior living home. At the closing the title company asked for a copy of the release - reasonable request. But then they wanted a doc showing the source of funds, which was a temporary account funded by the developer. After lots of wailing and knashing of teeth, we finally closed after nine hours of finger pointing and anxiety. It seems like at every single closing we stumble across something new.

I have had problems in the past with buyers who receive all or a portion of their income in cash.  Oftem these folks don't deposit these funds in banks and so a "paper trail" is hard to come-by.  As the credit market continues to tighten-up, Buyers in this group may not be able to obtain a mortgage in the future.

This is just yet another situation where we can advise a client right, BUT the reality is, who can read the buyer's mind? Some people may say I am unprofessional with such a statement, but the fact is, if we sat down and advised a client of every single possability where the process could get delayed or messed up, we could literally spend an entire week with one client only. The best thing is to listen closely to your mortgage person (praying to God they know what they are doing!) and moving up and over any snags.

It kills me when things like this happen!  You tell people over and over what to do and not do and they apparently aren't listening.  What really disturbs me are the clients who question everything you tell them.  "What does it matter if I..."  "That's not how it was when I...."  It shouldn't be a problem..."  Do you want the house or not?  JUST LISTEN TO THE PROFESSIONALS!

Janet - OMG!  I was just having this conversation yesterday with a client.  The doc order was submitted and my client is waiting to receive a check from his 401k plan for the money that he is using to close.  Of course, we have already sourced the 401k acct and the withdrawl from it for his funds to close.

The problem is that the check was supposedly sent on two weeks ago (they don't do wires) and my client still doesn't have it so they put a stop payment on it and he's having another one expressed to him but we're concerned that it will hold up the funding.  He says to me yesterday, "I can just borrow the money from my in-laws and pay them back when I get my check".  As you can imagine, I responded with a resounding "NO!"

I had to explain to him that we would then have to source the funds from the in-laws as well as the loan and that was just a whole other can of worms that he did not want reigning down on him right now (this is just the latest hiccup in this transaction).  So, we are waiting now and hoping that the 401k funds make it to escrow by the time we're ready to fund.  Good grief, the drama of it all.

Simple things can kill deals. We once had a person who was saying he understands all that, but he kept shopping around, and financing a car, and every time his credit was falling just a bit under the guidelines of the program used.

He finally shopped himself out of the deal.

True words Janet. Banks have to have the documentation thus and so. You tell people what you need for a reason! If they don't listen it is to their detriment. 

Hi Janet -- I'm glad Gene Mundt reblogged your post since I missed it first time around. There are so many things we, mortgage brokers and REALTORS alike, need to bring to our clients' attention.

A number of years back one of my buy clients quit her job mid-way through the purchase. We got the deal closed (husband still was working) but it sure was dicey.

What seems so obvious to us isn't always to buyers; it's up to us to tell them.

Such good advice. Its funny how people move money around while in the middle of a refinance/purchase transaction. We try to cover this at the beginning of the loan process. Most of the time it works, but there are those times when someone 'forgets' or needed to move things around and thought it wouldn't be a big deal.

Janet - Excellent advice!  I had a buyer who was in a similar situation because he didn't think it was a big deal to move money around even though he was told not to.  DELAY

Great post Janet!  Sometimes we become somewhat flat footed regarding things like this but as you remind us this type of detail can cause a huge problem!  Thanks for the info!

Brian.